US Treasury Secretary Janet Yellen at the New Financial Pact Summit in Paris on June 22, 2023 (AFP/Archives/STEFANO RELLANDINI)
The US economy has “proved stronger” than expected despite recession forecasts, US Treasury Secretary Janet Yellen said Friday during a speech in New Orleans.
“I continue to believe there is a path to reduce inflation while maintaining a strong labor market. Without underestimating the risks ahead, the evidence we have so far suggests we are on that path,” he said. added Ms. Yellen.
The data published in recent days has indeed exceeded expectations, with a final estimate of GDP growth for the first quarter at 2%, well above the first estimate which anticipated only 1.1%, and inflation now the lowest in 18 months, at 3.8% over one year, according to the PCE index favored by the Federal Reserve (Fed).
But business leaders are “showing more and more signs of confidence” in the strength of the American economy, she added, “even if some sectors are slowing, the pace of household spending remains solid and businesses continue to invest.
A trend that should continue, said Ms. Yellen, who judges that the “solidity of the job market, and the persistence of business and household spending should keep our economy afloat, even if it slows down as inflation subsides”.
The solidity of the American economic indicators leads a certain number of analysts to now wonder if the recession, considered until now as inevitable, will indeed occur.
Initially expected at the start of 2023, the risk of a weak recession is now considered for the second half of the year, even if the Federal Reserve underlined that it would try to bring inflation back to its target of 2% avoiding recession.
But Fed Chairman Jerome Powell has repeatedly said that getting inflation back to calmer waters is the primary goal, even if it does some economic damage.
“The eventual cost of a strong policy against inflation will always remain lower than the cost that high inflation will have for our economy if we do not act”, repeated Mr. Powell during a round table on Wednesday in Sinta (Portugal).
During her speech, the Treasury Secretary also praised the economic successes of the policy pursued by President Biden, whose team is trying to focus the campaign for his re-election in 2024, precisely on the political effects of his economic reforms, dubbed “Bidenomics”.
© 2023 AFP
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